298 Tonnes of Gold Underwater as ETF Redemption Looms
By John Nada·Jun 25, 2026·3 min read
Gold ETF outflows accelerate as the Fed turns hawkish; central banks remain steady buyers, raising questions about the future of gold prices.
Gold ETF outflows are accelerating in 2026 because the rate-cut thesis that drove gold to $5,595 in January has reversed," reports GoldSilver.com. The Federal Reserve's hawkish shift, under Chair Kevin Warsh, has reshaped market expectations, with the dollar soaring to a 13-month high. As inflation fears rekindle due to Iran-war-driven oil prices, gold wavers near $4,009 an ounce, inching up slightly from a recent dip below $4,000. Meanwhile, silver is trading at $58.03, with both metals down approximately 29% from their January highs.
According to Standard Chartered analyst Suki Cooper, nearly 298 tonnes of gold within ETFs are held at a loss. This creates a structural supply ceiling, hindering any near-term price recovery. ETF holders initially bought gold based on a rate-cut thesis, anticipating a price surge. However, with the thesis evaporating, these holders are now looking to exit. Every dollar recovery toward their entry points could trigger selling pressure, further complicating a swift price rebound.
Gold-backed ETFs saw a net May outflow of 16 metric tonnes. The outflow continued into June, although a $1.1 billion inflow last week offers a glimmer of hope. This inflow, while encouraging, does not erase the overhang. The underlying issue remains: ETF redemptions act as a supply event, not merely a repositioning, bringing the metal back to the market and potentially suppressing price gains.
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Yet, as ETF holders look to exit, another class of buyer remains steadfast. The World Gold Council's 2026 Central Bank Gold Reserves Survey indicates 89% of reserve managers plan to increase holdings in the next year. A record 45% of central banks, including Poland, China, and the Czech Republic, have already demonstrated continued buying, adding significant quantities in recent months. Central banks, immune to rate volatility and stop-loss triggers, continue to accumulate as part of long-term strategies. These sovereign buyers operate on decade-long mandates, unaffected by short-term market fluctuations.
The ECB in its June report confirmed a shift: gold now trumps U.S. Treasuries as the largest reserve asset, accounting for 27% of global holdings. This reflects both sustained buying and price appreciation. Gold's surpassing of Treasuries underscores a structural change in reserve allocation, driven by both increased demand and valuation gains.
The question remains whether the central bank's bid can counterbalance the ETF overhang. While the 298-tonne backlog looms, the unwavering demand from sovereign buyers suggests a floor far more enduring than transient market jitters. The World Gold Council's survey also highlights that 74% of central banks expect the US dollar's share of global reserves to decline over the next five years, indicating a continued shift towards non-dollar assets. As GoldSilver.com notes, "The structural shift in central bank reserve allocation does not."